In a memo sent to federal prosecutors this week, Mr. Sessions said the Obama administration’s interpretation of Title VII went beyond the scope of the law, which applies to race, color, sex, religion and national origin.

“Title VII’s prohibition on sex discrimination encompasses discrimination between men and women but does not encompass discrimination based on gender identity per se, including transgender status,” Mr. Sessions wrote.

He rolled back a 2014 policy by then-Attorney General Eric H. Holder Jr., who said Title VII prohibited employers from making “sex-based considerations” based on gender identity or a person’s identification as transgender.

The decision roiled civil rights activists, who saw the memo as a direct attack on transgender individuals.

James Esseks, director of the American Civil Liberties Union’s LGBT and HIV Project, called it “another low point.”

“This Department of Justice under Jeff Sessions has time and time again made it clear that its explicit agenda is to attack and undermine the civil rights of our most vulnerable communities, rather than standing up for them as they should be doing,” he said.

Mr. Sessions’ policy “flies in the face of case law that has reached the opposite conclusion,” said Vanita Gupta, president and CEO of the Leadership Conference on Civil and Human Rights and the former head of the DOJ’s Civil Rights Division.

LGBT rights group Freedom for All Americans pointed to cases it said established a precedent for extending Title VII protections to gender identity — including the Supreme Court’s 1989 ruling in the Price Waterhouse v. Hopkins case that found that sex discrimination includes sex stereotyping.

The 6th U.S. Circuit Court of Appeals has twice ruled that gender identity is protected from discrimination under Title VII, while the 7th Circuit ruled this year that Title VII protects gay workers from discrimination based on sexual orientation.

The 11th Circuit has ruled in favor of a transgender woman who was fired because she intended to transition from male to female, though the complaint in that case was brought under the Equal Protection Clause and not Title VII. The 11th Circuit has rejected gender identity as a basis for a Civil Rights Act claim, and other courts have also ruled that way.

Justice Department officials said the reason for the policy change was because the Holder policy was an overreach.

“The Department of Justice cannot expand the law beyond what Congress has provided,” said DOJ spokesman Devin O’Malley. “Unfortunately, the last administration abandoned that fundamental principle, which necessitated today’s action.”

Mr. Sessions’ memo goes on to say that it should not “be construed to condone mistreatment on the basis or gender identity, or to express a policy view on whether Congress should amend Title VII or provide different or additional protection.”

“The Justice Department must and will continue to affirm the dignity of all people, including transgender individuals,” he wrote.

House Minority Leader Nancy Pelosi, California Democrat, said Congress should step in and clear the issue up by passing the Equality Act, which would add sexual orientation and gender identity protections to Title VII.

The Justice Department policy puts it at odds with the Equal Employment Opportunity Commission, which investigates allegations of discrimination against employers, and interprets and enforces Title VII’s prohibition of sex discrimination as “forbidding any employment discrimination based on gender identity or sexual orientation.”

The EEOC notes on its website that Title VII “does not explicitly include sexual orientation or gender identity in its list of protected bases.” But the commission believes interpretation that such discrimination is unlawful is consistent with the Price Waterhouse v. Hopkins ruling.